A company is negotiating a contract to sell wooden boards overseas. The fixed cost that can be allocated to the production of boards is $800,000 per month. The variable cost per thousand board feet is $155.50. The price charged will be determined by p = $600 − (0.5)D per 1,000 board feet. (i) For this situation, determine the optimal monthly sales volume for this product and calculate the profit (or loss) at the optimal volume. (ii) Calculate/Identify the range of profitable demand during a month.

A company is negotiating a contract to sell wooden boards overseas. The fixed cost that can be allocated to the production of boards is $800,000 per month. The variable cost per thousand board feet is $155.50. The price charged will be determined by p = $600 − (0.5)D per 1,000 board feet. (i) For this situation, determine the optimal monthly sales volume for this product and calculate the profit (or loss) at the optimal volume. (ii) Calculate/Identify the range of profitable demand during a month.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter8: Cost Analysis

Section: Chapter Questions

Problem 5E

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